Off-premise alcohol traffic (BUD)
Traffic to the largest packaged goods store chains decreased in July for the third consecutive month as seen in the chart below. In July, traffic decreased 6.6% to ABC Fine Wine & Spirits, decreased 4.4% to Total Wine, and decreased 3.4% to BevMo!. Sequentially traffic weakened at both BevMo! and Total Wine. Off-premise beer sales grew 4.4% in the latest four-week period and are now up slightly for the YTD period, but accelerating price increases are behind the improvement.
Baby formula ramping up (PRGO)
This week Abbott is restarting production of Similac, its largest infant formula brand. It will take another six weeks before products begin to hit retailers’ shelves. In June, Abbott had begun to produce its specialty formulas, but severe thunderstorms required the plants to be shut down and cleaned. The FDA’s shutdown of Abbott’s plant in Michigan resulted in a nationwide shortage of infant formula. The out-of-stock rate reached 61% at its worst at the end of May and has improved to 61% recently. There are still some states with out-of-stock rates in the 70%+ range. Similac was the main formula in many states’ USDA Women, Infants, and Children (WIC) SNAP plan. WIC covers more than 1.2 million infants who collectively consume 56% of the infant formula in the U.S. With the return of Similac production, infant formula inventories on retailers’ shelves should be back to normal in Q4. Perrigo is the leading manufacturer of store label infant formula.
Canadian beer sales (TAP)
Total beer volumes in Canada decreased 4.4% YOY in July, improving from a 6.9% decrease in June. Domestic beer volumes fell 7.0% YOY in July, improving slightly from a 9.4% decrease in June. Imported beer volumes increased 17%, accelerating from 13% growth in June. Year-to-date beer volumes are down over 5% in Canada. Consumption of beer at home has returned to pre-pandemic levels, but off-premise consumption is still down some 35 to 40%. A labor shortage is limiting on-premise hours, fewer events, double-digit inflationary price increases, and other forms of alcohol are all headwinds for Canada’s beer industry. In 2017, Canada indexed beer taxes to CPI, which could result in a 7% increase in April 2023.
